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index computation. The annual deflator index and the layer-
valuation index are indexes of price change between the prior
year and the current year; therefore, the denominator of each
index, computationally, represents the aggregate of all items in
ending inventory at beginning of the year value. When
Investments defined the units used to compute beginning of the
year value of ending inventory, it was in substance defining its
items of inventory. Thus, when Investments changed the
definition of its inventory units from body size to model line,
it changed its definition of an item of inventory for purposes of
section 1.446-1(e)(2)(ii)(a) and (c), Income Tax Regs.
Petitioner next argues that, even if the units used in the
computation are "items" for section 446 purposes, the change from
body size to model line was not a change in item for section
446(e) purposes, as such change was a permissible refinement or
delineation of Investments’ existing item definition.
We have previously determined that new or separate items may
be created or arise in a taxpayer’s dollar-value LIFO pool.
Hamilton Indus., Inc. & Sub. v. Commissioner, 97 T.C. 120 (1991);
Amity Leather Prods. Co. v. Commissioner, 82 T.C. 726 (1984);
Wendle Ford Sales, Inc. v. Commissioner, 72 T.C. at 452.14 More
14 These cases dealt with the double-extension method of
valuing the base-year cost of ending inventory. However, since
the double extension method and the link-chain method are both
concerned with valuing the taxpayer’s items in a pool, sec.
1.472-8(a), Income Tax Regs., the analysis in these cases is
relevant in the case at bar, even though Investments utilized the
link-chain method of pricing its items of inventory.
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